Exhibit 10.4


 


UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MINNESOTA


 


	
  UNITED STATES OF AMERICA,

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  
	
  Plaintiff,

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  
	
  v.

  	
  :

  	
  NO.
                                        

  
	
   

  	
  :

  	
   

  
	
  AGA MEDICAL CORPORATION,

  	
  :

  	
  DEFERRED
  PROSECUTION 

  
	
   

  	
  :

  	
  AGREEMENT

  
	
   

  	
  :

  	
   

  
	
  Defendant.

  	
  :

  	
   

  
	
   

  	
  :

  	
   

  



 


Defendant AGA Medical Corporation (“AGA”), a Minnesota corporation, by
its undersigned attorneys, pursuant to authority granted by AGA’s Board of
Directors, and the United States Department of Justice, Criminal Division,
Fraud Section (the “Department of Justice” or “the Department”) enter into
this Deferred Prosecution Agreement (“the Agreement”). The terms and conditions
of this Agreement are as follows:


 


Criminal Information and Acceptance
of Responsibility


 


1. AGA accepts and acknowledges that the United States will file a
two-count criminal Information in the United States District Court for the
District of Minnesota charging AGA with conspiracy to commit an offense against
the United States, in violation of 18 U.S.C. § 371, that is, to violate the
Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, 15 U.S.C. §
78dd-2(a)(l) (Count One); and violating the FCPA, 15 U.S.C. § 78dd-2(a)(l) and
18 U.S.C. § 2 (Count Two). In so doing, AGA knowingly waives its right to
indictment on these charges, as well as all rights to a speedy trial pursuant
to the Sixth Amendment to the United


 

















 


States
Constitution, Title 18, United States Code Section 3161, and Federal Rule of
Criminal Procedure 48(b). In addition, AGA consents to the filing of the
Information and the Agreement in the United States District Court for the
District of Minnesota.


 


2. AGA admits, accepts and acknowledges that it is responsible for the
acts of its officers, employees and agents, as set forth in the Statement of
Facts attached hereto as “Attachment A,” and incorporated by reference into
this Agreement, and that the facts described in Attachment A are true and
accurate. Should the Department initiate the prosecution that is deferred by
this Agreement, AGA agrees that it will neither contest the admissibility of,
nor contradict, in any such proceeding, the Statement of Facts.


 


Term of the Agreement


 


3. This Agreement is effective for a period beginning on the latest
date on which any party signs it and ending three (3) years and seven (7) calendar
days from that date (the “Term”), However, AGA agrees that, in the event that
the Department determines, in its sole discretion, that AGA has knowingly
violated any provision of this Agreement, an extension or extensions of the term
of the Agreement may be imposed by Department, in its sole discretion, for up
to a total additional time period of one-year. Any extension of the Agreement
extends all terms of this Agreement for an equivalent period. Conversely, in
the event the Department finds, in its sole discretion, that there exists a
change in circumstances sufficient to eliminate the need for the Monitor, and
the other provisions of this Agreement have been satisfied, the Term of the
Agreement may be terminated early.


 


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Voluntary Cooperation


 


4. The Department enters into this Agreement based on the individual
facts and circumstances presented by this case and AGA. Among the facts
considered were: (a) AGA voluntarily and timely disclosed the misconduct
described in the Information and Statement of Facts; (b) AGA conducted a
thorough internal investigation of that misconduct; (c) AGA reported all
of its findings to the Department; (d) AGA cooperated in the Department’s
investigation of this matter; (e) AGA has undertaken remedial measures as
contemplated by this Agreement; and (f) AGA has agreed to continue to
cooperate with the Department in any investigation of the conduct of AGA and
its directors, officers, employees, agents, consultants, contractors and
subcontractors relating to violations of the FCPA.


 


5. During the Term of this Agreement, AGA agrees to cooperate fully
with the Department, and any other authority or agency, domestic or foreign,
designated by the Department investigating AGA, or any of its present and
former directors, officers, employees, agents, consultants, contractors and
subcontractors, or any other party, in any and all matters relating to corrupt
payments. AGA agrees that its cooperation shall include, but is not limited to,
the following:


 


a. AGA shall truthfully disclose all information with respect to its
activities and those of its present and former directors, officers, employees,
agents, consultants, contractors and subcontractors, concerning all matters
relating to corrupt payments, related false books and records, and inadequate
internal controls about which AGA has any knowledge or


 


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about which the
Department may inquire. This obligation of truthful disclosure includes the
obligation of AGA to provide to the Department, upon request, any document,
record or other tangible evidence relating to such corrupt payments, books and
records, and internal controls about which the Department may inquire of AGA.


 


i. The Department specifically reserves the right to request that AGA
provide the Department with access to information, documents, records,
facilities and/or employees that may be subject to a claim of attorney-client
privilege and/or the attorney work-product doctrine.


 


ii. Upon written notice to the Department, AGA specifically reserves
the right to withhold access to information, documents, records, facilities
and/or employees based upon an assertion of a valid claim of attorney-client
privilege or application of the attorney work-product doctrine. Such notice
shall include a general description of the nature of the information,
documents, records, facilities and/or employees that are being withheld, as
well as the basis for the claim.


 


iii. In the event that AGA withholds access to the information,
documents, records, facilities and/or employees of AGA, the Department may
consider this fact in determining whether AGA has fully cooperated with the
Department.


 


iv. Except as provided in this paragraph, AGA shall not withhold from
the Department any information, documents, records, facilities and/or employees
on the basis of an attorney-client privilege or work product claim.


 


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b. Upon request of the Department, with respect to any issue relevant
to its investigation of corrupt payments in connection with the operations of
AGA, related books and records and inadequate internal controls, AGA shall
designate knowledgeable employees, agents or attorneys to provide to the
Department the information and materials described in Paragraph 5(a) above,
on behalf of AGA. It is further understood that AGA must at all times provide
complete, truthful and accurate information.


 


c. With respect to any issue relevant to the Department’s investigation
of corrupt payments in connection with the operations of AGA, or any of its
present or former subsidiaries or affiliates, AGA shall use its best efforts to
make available for interviews or testimony, as requested by the Department,
present or former directors, officers, employees, agents and consultants of AGA
as well as the directors, officers, employees, agents and consultants of
contractors and subcontractors. This obligation includes, but is not limited
to, sworn testimony before a federal grand jury or in federal trials, as well
as interviews with federal law enforcement authorities. Cooperation under this
paragraph will include identification of witnesses who, to the knowledge of
AGA, may have material information regarding the matters under investigation.


 


d. With respect to any information, testimony, documents, records or
other tangible evidence provided to the Department pursuant to this Agreement,
AGA consents to any and all disclosures to other governmental authorities,
whether United States authorities or those of a foreign government, of such
materials as the Department, in its sole discretion, shall deem appropriate.


 


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Payment of Monetary Penalty


 


6. AGA agrees to pay a monetary penalty in the amount of $2,000,000 to
the United States Treasury within ten days of the execution of this Agreement.
The $2,000,000 penalty is final and shall not be refunded: (a) if the
Department moves to dismiss the Information pursuant to this Agreement; or (b) should
the Department later determine that AGA has breached this Agreement and bring a
prosecution against AGA. Furthermore, nothing in this Agreement shall be deemed
an agreement by the Department that the $2,000,000 amount is the maximum
penalty that may be imposed in any such prosecution, and the Department is not
precluded from arguing that the Court should impose a higher fine, although the
Department agrees that under those circumstances, it will recommend to the
Court that the amount paid under this Agreement should be offset against any
fine the Court imposes as part of a judgment.


 


Conditional Release from Criminal
Liability


 


7. In return for the full and truthful cooperation of AGA, and
compliance with the terms and conditions of this Agreement, the Department
agrees not to use any information related to the conduct described in the
attached Statement of Facts against AGA in any criminal or civil case, except: (a) in
a prosecution for perjury or obstruction of justice; (b) in a prosecution
for making a false statement; (c) in a prosecution or other proceeding
relating to any crime of violence; or (d) in a prosecution or other
proceeding relating to a violation of any provision of Title 26 of the United
States Code. In addition, the Department agrees, except as provided herein,
that it will not bring any criminal or civil case against AGA related to the
conduct of present and former directors, officers, employees, agents,
consultants, contractors and


 


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subcontractors, as
described in the attached Statement of Facts, or relating to information AGA
disclosed to the Department prior to the date on which this Agreement was
signed.


 


a. This paragraph does not provide any protection against prosecution
for any corrupt payments or false accounting, if any, made in the future by
AGA, or any of its directors, officers, employees, agents, consultants,
contractors and subcontractors irrespective of whether disclosed by AGA,
pursuant to the terms of this Agreement.


 


b. This paragraph also does not provide any protection against
prosecution for any corrupt payments made in the past which are not described
in the attached Statement of Facts or were not disclosed to the Department
prior to the date on which this Agreement was signed. In addition, this
paragraph does not provide any protection against criminal prosecution of any
present or former director, officer, employee, shareholder, agent or consultant
of AGA for any violations committed by them.


 


Corporate Compliance Program


 


8. AGA represents that it has implemented and will continue to
implement a compliance and ethics program designed to detect and prevent
violations of the FCPA and other applicable anti-corruption laws throughout its
operations, including those of its affiliates, joint ventures, and those of its
contractors and subcontractors, with responsibilities that include interactions
with foreign officials. Implementation of these policies and procedures shall
not be construed in any future enforcement proceeding as providing immunity or
amnesty for any crimes not disclosed to the Department as of the date of
signing of this Agreement for which AGA would otherwise be responsible.


 


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9. In order to address deficiencies in its internal controls, policies
and procedures regarding compliance with the FCPA and other applicable
anti-corruption laws, AGA represents that it has undertaken, or will undertake
in the near-future, in a manner consistent with all of its obligations under
this Agreement, a review of the existing internal controls, policies and
procedures within AGA. Where necessary and appropriate, AGA will adopt new or
modify existing internal controls, policies and procedures in order to ensure
that AGA maintains: (a) a system of internal accounting controls designed
to ensure the making and keeping of fair and accurate books, records and
accounts; and (b) a rigorous anti-corruption compliance code designed to
detect and deter violations of the FCPA and other applicable anti-corruption
laws. The internal controls system and compliance code will include, but not be
limited to, the minimum elements set forth in Attachment C, which is
incorporated by reference into this Agreement.


 


Independent Corporate Monitor


 


10. AGA agrees to engage an independent corporate monitor (“the Monitor”)
within sixty (60) calendar days of signing this Agreement. Within thirty (30)
calendar days after the signing of this Agreement, and after consultation with
the Department, AGA will propose to the Department a candidate to serve as the
Monitor. The Monitor shall have, at a minimum, the following qualifications:


 


a. demonstrated expertise with respect to the FCPA, including
experience counseling on FCPA issues;


 


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b. experience designing and/or reviewing corporate compliance policies,
procedures and internal controls, including FCPA-specific policies, procedures
and internal controls;


 


c. the ability to access and deploy resources as necessary to discharge
the Monitor’s duties as described in the Agreement; and


 


d. sufficient independence from AGA to ensure effective and impartial
performance of the Monitor’s duties as described in the Agreement.


 


11. The Department retains the right, in its sole discretion, to accept
or reject any Monitor proposed by AGA pursuant to the Agreement. In the event
the Department rejects a proposed monitor, AGA shall propose another candidate
within ten (10) calendar days after receiving notice of the rejection.
This process shall continue until a Monitor acceptable to all parties is
chosen. The Monitor’s term shall be three (3) years from the date on which
this Agreement was signed, subject to extension or early termination as
described in paragraph 3. The Monitor’s duties and authority, and the
obligations of AGA with respect to the Monitor and the Department, are set
forth in Attachment D, which is incorporated by reference into this Agreement.


 


Deferred Prosecution


 


12. In consideration of: (a) the past and future cooperation of
AGA described in Paragraphs 4 and 5 above; (b) AGA’s payment of a monetary
penalty of $2,000,000; and (c) AGA’s adoption and maintenance of remedial
measures, and independent review and audit of


 


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such measures,
including the compliance code and review by the Monitor described in Paragraphs
8 through 11 above, the Department agrees that any prosecution of AGA for the
conduct set forth in the attached Statement of Facts, and for the conduct
relating to information that AGA disclosed to the Department, prior to the
signing of this Agreement, be and hereby is deferred for the Term of this
Agreement.


 


13. The Department further agrees that if AGA fully complies with all of
its obligations under this Agreement, the Department will not continue the
criminal prosecution against AGA described in Paragraph 1 and, after the Term,
this Agreement shall expire and the Department will move to dismiss the
criminal Information pending against AGA.


 


Breach of the Agreement


 


14. If, during the Term of this Agreement, the Department determines,
in its sole discretion, that AGA has committed any felony under federal law
subsequent to the signing of this Agreement, has, at any time, provided
deliberately false, incomplete or misleading information, or has otherwise
breached the Agreement, AGA shall thereafter be subject to prosecution for any
federal criminal violation of which the Department has knowledge. Any such
prosecutions may be premised on information provided by AGA. Any such
prosecution that is not time-barred by the applicable statute of limitations on
the date of the signing of this Agreement may be commenced against AGA
notwithstanding the expiration of the statute of limitations between the
signing of this Agreement and the expiration of the Term plus one year. Thus,
by signing this Agreement, AGA agrees that the statute of limitations with
respect to any prosecution that is not time-barred on the date of this
Agreement shall be tolled for the Term plus one year.


 


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15. In the event that the Department determines that AGA has breached
this Agreement: (a) all statements made by or on behalf of AGA to the
Department or to the Court, including the attached Statement of Facts, and any
testimony given by AGA before a grand jury or any tribunal, at any legislative
hearings whether prior or subsequent to this Agreement, or any leads derived
from such statements or testimony, shall be admissible in evidence in any and
all criminal proceedings brought by the Department against AGA; and (b) AGA
shall not assert any claim under the United States Constitution, Rule 1l(f) of
the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of
Evidence or any other federal rule, that statements made by or on behalf of AGA
prior or subsequent to this Agreement, and any leads derived therefrom, should
be suppressed. The decision whether conduct or statements of any individual
will be imputed to AGA for the purpose of determining whether AGA has violated
any provision of this Agreement shall be in the sole discretion of the
Department.


 


16. AGA acknowledges that the Department has made no representations,
assurances or promises concerning what sentence may be imposed by the Court if
AGA breaches this Agreement and this matter proceeds to judgment. AGA further
acknowledges that any such sentence is solely within the discretion of the
Court and that nothing in this Agreement binds or restricts the Court in the
exercise of such discretion.


 


Sale or Merger of AGA


 


17. AGA agrees that in the event it sells, merges, or transfers all or
substantially all of its business operations as they exist as of the date of
this Agreement, whether such sale is


 


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structured as a
stock or asset sale, merger or transfer, it shall include in any contract for
sale, merger or transfer a provision binding the purchaser, or any successor in
interest thereto, to the obligations described in this Agreement.


 


Public Statements by AGA


 


18. AGA expressly agrees that it shall not, through present or future
attorneys, directors, officers, employees, agents or any other person
authorized to speak for AGA make any public statement, in litigation or
otherwise, contradicting the acceptance of responsibility by AGA set forth
above or the facts described in the attached Statement of Facts. Any such
contradictory statement shall, subject to cure rights of AGA described below,
constitute a breach of this Agreement and AGA thereafter shall be subject to
prosecution as set forth in Paragraphs 13 and 14 of this Agreement. The
decision whether any public statement by any such person contradicting a fact
contained in the Statement of Facts will be imputed to AGA for the purpose of
determining whether they have breached this Agreement shall be at the sole
discretion of the Department. If the Department determines that a public
statement by any such person contradicts in whole or in part a statement
contained in the Statement of Facts, the Department shall so notify AGA, and
AGA may avoid a breach of this Agreement by publicly repudiating such statement(s) within
five (5) business days after notification. Consistent with the obligations
of AGA as set forth above, AGA shall be permitted to raise defenses and to
assert affirmative claims in civil and regulatory proceedings relating to the
matters set forth in the Statement of Facts. This paragraph does not apply to
any statement made by any present or former employee of AGA in the course of
any criminal, regulatory or civil case initiated against such individual,
unless such individual is speaking on behalf of AGA.


 


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19. In connection with this Agreement, AGA shall not issue a press
release unless it first determines that the text of the release is acceptable
to the Department.


 


Limitations on Binding Effect of
Agreement


 


20. This Agreement is binding on AGA and the Department but
specifically does not bind any other federal agencies, or any state, local or
foreign law enforcement or regulatory agencies, although the Department will
bring the cooperation of AGA and its compliance with its other obligations
under this Agreement, to the attention of such agencies and authorities if
requested to do so by AGA.


 


Complete Agreement


 


21. This Agreement sets forth all the terms of the Deferred Prosecution
Agreement between AGA and the Department. No amendments, modifications or
additions to this Agreement shall be valid unless they are in writing and
signed by the Department, the attorneys for AGA and a duly authorized
representative of AGA.


 


Notice


 


22. Any notice to the Department under this Agreement shall be given by
personal delivery, overnight delivery by a recognized delivery service or
registered or certified mail, in each case, for the Department, addressed to
Mark F. Mendelsohn (or his successor), Deputy Chief, Fraud Section, Criminal
Division, U.S. Department of Justice, fourth floor, 1400 New


 


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York Avenue, N.W.,
Washington, D.C. 20005 and, for AGA, addressed to Ronald E. Lund, General
Counsel, AGA Medical Corporation. Notice shall be effective upon actual receipt
by AGA.


 


AGREED:


 


FOR
AGA MEDICAL CORPORATION:


 


	
   

  	
   

  	
  /s/ Stanley Soya

  
	
   

  	
   

  	
  Stanley Soya

  
	
   

  	
   

  	
  Jackson Kelly,
  LLP

  
	
   

  	
   

  	
  Counsel for AGA
  Medical Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FOR
  THE DEPARTMENT OF JUSTICE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STEVEN A.
  TYRRELL

  
	
   

  	
   

  	
  Chief, Fraud
  Section

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Bybee

  
	
   

  	
   

  	
  David Bybee

  
	
   

  	
   

  	
  Trial Attorney,
  Fraud Section

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  William B.
  Jacobson

  
	
   

  	
   

  	
  Assistant Chief

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  United States
  Department of Justice

  
	
   

  	
   

  	
  Fraud Section,
  Criminal Division

  
	
   

  	
   

  	
  10th &
  Constitution Avenue, NW

  
	
   

  	
   

  	
  Washington, D.C.
  20530

  
	
   

  	
   

  	
  (202) 514-7023

  



 


 


Filed at
Minneapolis, Minnesota, on this 2nd day of June, 2008.


 


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ATTACHMENT
A


 


STATEMENT OF FACTS


 


The following Statement of Facts is incorporated by this reference as
part of the Deferred Prosecution Agreement (“the Agreement”) between the United
States Department of Justice, Criminal Division, Fraud Section (“the Department”)
and AGA Medical Corporation (“AGA”) and the parties hereby agree and stipulate
that the following information is true and accurate. As set forth in Paragraph
2 of the Agreement, AGA accepts and acknowledges that it is responsible for the
acts of its officers, employees and agents as set forth below.


 


Should the Department initiate the prosecution that is deferred by this
Agreement, AGA agrees that it will neither contest the admissibility of, nor
contradict, this Statement of Facts in any such proceeding.


 


If this matter were to proceed to trial, the United States would prove
beyond a reasonable doubt, by admissible evidence, the facts alleged in the
Criminal Information filed contemporaneously with this Agreement. This evidence
would establish the following:


 


1. AGA MEDICAL CORPORATION (“AGA”) was incorporated in 1995 in
Minnesota, had its principal place of business in Golden Valley, Minnesota, and
was a “domestic concern” as that term is used in the FCPA, 15 U.S.C.§
78dd-2(h)(l)(B).


 


2. AGA manufactured and sold medical devices for the minimally invasive
treatment of congenital heart defects. AGA marketed and sold its products in
over 90 countries, including the People’s Republic of China (“China”), through
a network of local distributors and direct sales.


 


3. AGA maintained email servers at its Golden Valley, Minnesota,
headquarters and all email directed to AGA employees was sent to these email
servers.


 

















 


4. From at least March 2000, through in or about late 2002, AGA
applied to the State Intellectual Property Office of the People’s Republic of
China (“the Chinese Patent Office”), an agency of the Chinese government, for
patents on several of its products.


 


5. From in or about 1995 to the present, “Officer A,” a U.S. citizen,
was a high-ranking officer and part owner of AGA, who had authority to set
company policy, contract with distributors, hire and fire employees, set sales
prices, and approve sales practices in foreign countries.


 


6. From in or about 1997, through in or about November 2001, “Employee
B,” a U.S. citizen, was the head of international sales for AGA.


 


7. From in or about December 2001, through in or about early-2007,
“Employee C,” a U.S. citizen, was the head of international sales for AGA.


 


8. In or about December 1998, AGA entered into an agreement with a
Chinese company to be the sole distributor of AGA products in China. An
employee of that company, “the Chinese Distributor,” a Chinese citizen, was
responsible for the AGA account at that company and was the main point of contact
for AGA. In or about 1999, the Chinese Distributor left his employer to form
his own company. AGA moved its business from the initial company to the Chinese
Distributor’s new company and AGA maintained a business relationship with the
Chinese Distributor and his company until AGA suspended the shipment of
products to the Chinese Distributor in June 2005. On or about April 12,
2006, AGA terminated its agreement with the Chinese Distributor.


 


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9. The Chinese Distributor was authorized to sell AGA products,
negotiate prices, and employ salespeople. The Chinese Distributor’s primary
customers were hospitals owned and operated by the government of China and
government-employee physicians working at those hospitals.


 


10. Government-owned and controlled hospitals in China are “instrumentalities”
of the Chinese government and physicians employed by such hospitals are “foreign
officials,” as those terms are used in the FCPA, 15 U.S.C. § 78dd-2(h)(2)(A).


 


11. In or about December 1997, Officer A, on behalf of AGA, signed
and executed a distributorship agreement with the company that then employed
the Chinese Distributor.


 


12. On or about December 20, 1997, the Chinese Distributor sent an
email from China to Officer A in Minnesota informing Officer A that hospitals
in China were asking for a 10% “discount” and physicians were asking for a 10% “commission”
on products sold. The Chinese Distributor further informed Officer A that if
AGA did not accept those terms, the hospitals and physicians would not purchase
AGA’s products.


 


13. In or about January 1998, the Chinese Distributor traveled
from China to Minnesota to discuss with Officer A, among other things, the
prices that the Chinese Distributor would charge for AGA’s products and the
kickbacks that the Chinese Distributor would pay to physicians in China in
order to induce them to purchase AGA’s products.


 


14. On or about July 16,1998, Officer A sent an e-mail to the
Chinese Distributor stating: “I understand that the fee you must pay each
physician was to be included in your selling price. It should therefore not be
an issue.”


 


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15. In or about December 1998, Officer A, on behalf of AGA, signed
and executed a second distributorship agreement with the company that then
employed the Chinese Distributor.


 


16. In or about 1999, after the Chinese Distributor left his original
employer to start his own company, Officer A, on behalf of AGA, entered into a
distributorship agreement with the Chinese Distributor’s new company.


 


17. On or about February 1, 2000, the Chinese Distributor again
traveled from China to Minnesota to discuss with Officer A, among other things,
the prices that the Chinese Distributor would charge in China for AGA’s
products and the kickbacks that the Chinese Distributor would pay to physicians
in China to induce them to purchase AGA’s products.


 


18. On or about March 19, 2001, the Chinese Distributor sent an
email from China to Employee B in Minnesota stating that the Chinese
Distributor had, to that point, paid $460,000 in “commissions” to physicians in
China and had also contacted a Chinese patent official to whom he would have to
pay money. The Chinese Distributor wrote, “This week I have maken [sic] an
appointment with one key person in China knowledge and Patent Protection
Bureau. Any action in China I must pay money to do.”


 


19. On or about May 11, 2001, the Chinese Distributor sent an
email from China to Officer A in Minnesota stating that the Chinese Distributor
had met with a Chinese patent official regarding AGA’s patent application and
that the official had agreed to speed up the review of AGA’s application and to
“solve some problems in different departments in her bureau” related to the
application. The Chinese Distributor explained in the email that he would


 


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have to “sponsor”
the patent official for this work and asked Officer A if AGA would agree to
cover that cost. By return email on or about that same day, Officer A agreed,
on behalf of AGA, to cover the fee to be paid to the Chinese patent official by
the Chinese Distributor, stating, “I am still in agreement with our prior
discussions and will cover her fee as long as we can get the [sic] patent
issued in a timely manner.”


 


20. On or about July 24, 2001, the Chinese Distributor sent an
email from China to Officer A in Minnesota stating: “Very good news that your
patents have been taken out from the stock and begun to check by the
observation people. My friends told me that if there are any news, they will
tell me. I think we will win this war if we can get the patent approvenment
[sic]. I contacted with two officials working in different departments. They
will help us from different ways. They don’t know each other and don’t know I
asked two people to help us ... About your new product, my friend told me that
you should ask your agent to apply the invent and practical patents sametime
[sic]. I can ask my friend to help to approve the practical patent in one year
and get 10 years protection.”


 


21. On or about February 6, 2002, the Chinese Distributor sent an
email from China to Employee C in Minnesota stating: “Please inform [Officer A]
don’t give up the application for the first three patents in China. I will
contact with the officials of China patent bureau again after Chinese new year.
Maybe money will help us.”


 


22. On or about March 20, 2002, the Chinese Distributor sent an
email from China informing Officer A that the Chinese Distributor had paid
$20,000 to the patent official to


 


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approve patents
for AGA products and that: “I just need the results of patents approved no
matter what way he do.”


 


23. On or about April 17, 2002, the Chinese Distributor sent an
email from China to Officer A stating: “Today my friend tells me that one of
your last two patents have been approved and the other one will be approved
soon.”


 


24. On or about October 18, 2002, the Chinese Distributor sent an
email from China to Officer A stating that the Chinese Distributer was
currently paying a “reward” to each physician who purchased an AGA product in
an amount ranging from $300 to $1,000 per product purchased.


 


25. On or about October 31, 2002, Employee C sent a memo to
Officer A listing the then-current prices for various AGA products in China and
including a column entitled “Reward to Physicians,” with dollar amounts listed
for each product. On or about this same date, Employee C hand-wrote a notation
reading, “OK, effective immediately,” at the top of this memo.


 


26. On or about October 21, 2003, Employee C wrote a memorandum to
Officer A and other AGA employees reporting on his recent trip to China. The
memorandum contained a chart of then-current prices being charged for various
AGA products in China and contained a notation reflecting the amount of the “rebates”
given by the Chinese Distributor to physicians.


 


27. On or about December 2, 2003, the Chinese Distributor sent an
email to Employee C regarding pricing for AGA products in China which stated: “My
company also need to provide 20% kickback for physicians and sometimes 10%
discount to hospitals.”


 


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28. On about December 5, 2003, the Chinese Distributer sent an email
from China to Employee C, explaining how physicians at hospitals in China
selected products for purchase: “The physicians suggest the patient to use
which device according [to] the patient’s family economic ability and the
kickback.”


 


29. On or about February 26, 2005, the Chinese Distributor sent an
email from China to Employee C providing Employee C with a list of then-current
prices being charged for various AGA products in China and informing Employee C
that the Chinese Distributor was paying physicians kickbacks of 15% to 25% of
the purchase price.


 


30. Between 1997 and 2005, AGA regularly shipped its products from
Minnesota to the Chinese Distributor in China, via interstate and international
freight carriers, for sale by the Chinese Distributor at the prices, and
pursuant to the terms, discussed and agreed to by AGA, Officer A, Employee B,
Employee C, the Chinese Distributor and others.


 


31. Between 1997 and 2005, AGA sales in China totaled approximately
$13.5 million.


 


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ATTACHMENT
B


 


CERTIFICATE OF CORPORATE RESOLUTION


 


WHEREAS, AGA MEDICAL CORPORATION (“AGA” or, “the Company”) has been
engaged in discussions with the United States Department of Justice, Criminal
Division, Fraud Section (“the Department”) in connection with issues
arising in relation to certain corrupt payments to foreign officials to
facilitate the award of contracts and obtaining business for the Company; and


 


WHEREAS, in order to resolve such discussions, it is proposed that the
Company enter into a certain agreement with the Department; and


 


WHEREAS the Company’s General Counsel, together with investigative and
outside counsel for the Company, have advised the Board of Directors of the
Company’s rights, possible defenses, the Sentencing Guidelines’ provisions, and
the consequences of entering into such agreement with the Department;


 


Therefore, this Board hereby RESOLVES that:


 


1. The Company (i) consents to the filing in the United States
District Court for the District of Minnesota of a two-count Information
charging AGA with conspiracy to commit an offense against the United States,
namely, to violate the Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. §
78dd-2(a)(1), in violation of 18 U.S.C. § 371 (Count One); and the payment of
bribes, in violation of 15 U.S.C. § 78dd-2 and 18 U.S.C. § 2 (Count Two); (ii) waives
indictment on such charges and enters into a Deferred Prosecution Agreement
with the Department; and (iii) agrees to accept a monetary penalty against
AGA of $2,000,000, and to pay $2,000,000 to the United States Treasury with
respect to the conduct described in the Information.


 

















 


2. The General Counsel, or his delegate, is hereby authorized,
empowered and directed, on behalf of the Company, to execute the Deferred
Prosecution Agreement substantially in such form as reviewed by this Board of
Directors at this meeting with such changes as the General Counsel, or his
delegate, may approve;


 


3. The General Counsel, or his delegate, is hereby authorized,
empowered and directed to take any and all actions as may be necessary or
appropriate, and to approve the forms, terms or provisions of any agreement or
other documents as may be necessary or appropriate to carry out and effectuate
the purpose and intent of the foregoing resolutions; and


 


4. All of the actions of the General Counsel, which actions would have
been authorized by the foregoing resolutions except that such actions were
taken prior to the adoption of such resolutions, are hereby severally ratified,
confirmed, approved and adopted as actions on behalf of the Company.


 


 


	
  Date:
  June 2, 2008

  	
   

  	
  /s/ Ronald E.
  Lund

  
	
   

  	
   

  	
  Ronald E. Lund,
  Secretary

  Board of Directors

  AGA Medical Corporation

  



 


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ATTACHMENT
C


 


CORPORATE COMPLIANCE PROGRAM


 


In order to address deficiencies in its internal controls, policies and
procedures regarding compliance with the Foreign Corrupt Practices Act (“FCPA”),
15 U.S.C §§ 78dd-l, et seq., and
other applicable anti-corruption laws, AGA Medical Corporation (“AGA”) agrees
to conduct, in a manner consistent with this Agreement, a review of its
existing internal controls, policies and procedures.


 


Where necessary and appropriate, AGA further agrees to adopt new or to
modify existing internal controls, policies and procedures in order to ensure
that it maintains: (a) a system of internal accounting controls designed
to ensure that AGA makes and keeps fair and accurate books, records and
accounts; and (b) a rigorous anti-corruption compliance code, standards
and procedures designed to detect and deter violations of the FCPA and other
applicable anti-corruption laws. At a minimum, this should include, but ought
not be limited to, the following elements:


 


1. A clearly articulated corporate policy against violations of the
FCPA and other applicable anti-corruption laws.


 


2. A system of financial and accounting procedures, including a system
of internal accounting controls, designed to ensure the maintenance of fair and
accurate books, records and accounts.


 


3. Promulgation of compliance standards and procedures designed to
reduce the prospect of violations of the FCPA, other applicable anti-corruption
laws and AGA’s compliance code. These standards and procedures should apply to
all directors, officers and employees and, where necessary and appropriate,
outside parties acting on behalf of AGA in foreign


 

















 


jurisdictions,
including agents, consultants, representatives, distributors, teaming partners
and joint venture partners (collectively referred to as “agents and business
partners”).


 


4. The assignment of responsibility to one or more senior corporate
officials of AGA for the implementation and oversight of compliance with
policies, standards and procedures regarding the FCPA and other applicable
anti-corruption laws. Such corporate official(s) shall have the authority
to report matters directly to AGA’s Board of Directors.


 


5. Mechanisms designed to ensure that the policies, standards and
procedures of AGA regarding the FCPA and other applicable anti-corruption laws
are effectively communicated to all directors, officers, employees and, where
necessary and appropriate, agents and business partners. These mechanisms shall
include: (A) periodic training for all such directors, officers,
employees, agents and business partners; and (B) annual certifications by
all such directors, officers, employees, agents and business partners,
certifying compliance with the training requirements.


 


6. An effective system for reporting suspected criminal conduct and/or
violations of the compliance policies, standards and procedures regarding the
FCPA and other applicable anti- corruption laws for directors, officers,
employees, agents and business partners.


 


7. Appropriate disciplinary procedures to address, among other things,
violations of the FCPA, other applicable anti-corruption laws or AGA’s
compliance code by directors, officers, employees, agents and business
partners.


 


8. Appropriate due diligence requirements pertaining to the retention
and oversight of agents and business partners.


 


2

















 


9. Standard provisions in agreements, contracts, and renewals thereof
with all agents and business partners which are designed to prevent violations
of the FCPA and other applicable anti-corruption laws, which provisions may,
depending upon the circumstances, include: (A) anti-corruption
representations and undertakings relating to compliance with the FCPA and other
applicable anti-corruption laws; (B) rights to conduct audits of the books
and records of the agent or business partner to ensure compliance with the
foregoing; and (C) rights to terminate an agent or business partner as a
result of any breach of anti-corruption laws, and regulations or
representations and undertakings related to such matters.


 


3














 


ATTACHMENT
D


 


INDEPENDENT CORPORATE MONITOR


 


1. Within sixty (60) calendar days of the execution of this Agreement,
AGA MEDICAL CORPORATION (“AGA” or “the Company”) agrees to engage an
independent corporate monitor (the “Monitor”) for a period of three (3) years.
The Monitor’s primary responsibility is to assess and monitor the Company’s
compliance with the terms of this Agreement so as to specifically address and
reduce the risk of any recurrence of the Company’s misconduct, including
evaluating the Company’s corporate compliance program with respect to the
Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. §§ 78dd-l, et seq., and other relevant
anti-corruption laws. Within thirty (30) calendar days after the signing of
this Agreement, and after consultation with the Department, AGA will propose to
the Department a candidate to serve as the Monitor. The Monitor shall have, at
a minimum, the following qualifications:


 


a. demonstrated expertise with respect to the FCPA, including
experience counseling on FCPA issues;


 


b. experience designing and/or reviewing corporate compliance policies,
procedures and internal controls, including FCPA-specific policies, procedures
and controls;


 


c. the ability to access and deploy resources as necessary to discharge
the Monitor’s duties as described in the Agreement; and


 


d. sufficient independence from AGA to ensure effective and impartial
performance of the Monitor’s duties as described in the Agreement.


 


2. The Department retains the right, in its sole discretion, to accept
or reject the Monitor proposed by AGA pursuant to the Agreement. In the event
the Department rejects a proposed monitor, AGA shall propose another candidate
within ten (10) calendar days after


 

















 


receiving notice
of the rejection. This process shall continue until a Monitor acceptable to all
parties is chosen. The Monitor’s term shall be three (3) years from the
date on which this Agreement was signed, subject to extension or early
termination as described in Paragraph 3 of the Agreement. The Monitor’s duties
and authority, and the obligations of AGA with respect to the Monitor and the
Department, are set forth below.


 


3. AGA agrees that it will not employ or be affiliated with the Monitor
for a period of not less than one year from the date the Monitor’s work has
ended.


 


4. The Monitor will review and evaluate the effectiveness of AGA’s
internal controls, record-keeping, and financial reporting policies and
procedures as they relate to AGA’s compliance with the books and records,
internal accounting controls and anti-bribery provisions of the FCPA, and other
applicable anti-corruption laws. This review and evaluation shall include an
assessment of those policies and procedures as actually implemented. The
retention agreement between AGA and the Monitor will reference this Agreement
and include this Agreement as an attachment so the Monitor is fully apprised of
his or her duties and responsibilities.


 


5. AGA shall cooperate fully with the Monitor and the Monitor shall
have the authority to take such reasonable steps as, in his or her view, may be
necessary to be fully informed about the compliance program of AGA within the
scope of his or her responsibilities under this Agreement. To that end, AGA
shall provide the Monitor with access to all information, documents, records,
facilities and/or employees that fall within the scope of responsibilities of
the Monitor under this Agreement. Any such disclosure by AGA to the


 


2

















 


Monitor concerning
corrupt payments, related books and records and related internal controls shall
not relieve AGA of its obligation truthfully to disclose such matters to the
Department.


 


a. The parties agree that the Monitor is an independent third-party,
not an employee or agent of AGA or the Department, and that no attorney-client
relationship shall be formed between AGA and the Monitor.


 


b. In the event that AGA seeks to withhold from the Monitor access to
information, documents, records, facilities and/or employees of AGA on grounds
that the information, documents, records, facilities and/or employees are
protected from disclosure by the attorney-client privilege or the attorney
work-product doctrine, AGA shall promptly provide written notice of this
determination to the Monitor and the Department. Such notice shall include a
general description of the nature of the information, documents, records,
facilities and/or employees that are being withheld, as well as the basis for
the claim. The Department may then consider whether to make a further request
for access to such information, documents, records, facilities and/or
employees, as provided in Paragraph 5(a) of the Agreement.


 


c. Except as provided in this paragraph, AGA shall not withhold from
the Monitor any information, documents, records, facilities and/or employees on
the basis of an attorney-client privilege or work product claim.


 


6. AGA agrees that:


 


a. The Monitor shall assess whether AGA’s existing policies and
procedures are reasonably designed to detect and prevent violations of the FCPA
and other applicable anti-corruption laws.


 


3

















 


b. The Monitor shall evaluate AGA’s compliance with this Agreement.


 


c. The Monitor shall oversee AGA’s implementation of and adherence to
all existing, modified or new policies and procedures relating to FCPA
compliance (the “Policies and Procedures”), including the minimum policies and
procedures set forth in Attachment C.


 


d. The Monitor shall ensure that the Policies and Procedures are
appropriately designed to accomplish their goals.


 


e. During the three (3) year term, the Monitor shall conduct an
initial review and prepare an initial report, followed by two follow-up reviews
and reports as described below:


 


(i) With respect to each of the three (3) reviews, after
initial consultations with AGA and the Department, the Monitor shall prepare a
written work plan for each review, which shall be submitted in advance to AGA
and the Department for comment. In order to conduct an effective initial review
and to understand fully any existing deficiencies in controls, policies and
procedures related to the FCPA and other applicable anti-corruption laws, the
Monitor’s initial work plan shall include such steps as are reasonably
necessary to develop an understanding of the facts and circumstances
surrounding any violations that may have occurred, but the parties do not
intend that the Monitor will conduct his or her own inquiry into those
historical events. Any disputes between AGA and the Monitor with respect to the
work plan shall be decided by the Department in its sole discretion.


 


(ii) In connection with the initial review, the Monitor shall
issue a written report within one hundred twenty (120) calendar days of his or
her retention setting forth the Monitor’s assessment and, if appropriate and
necessary, making recommendations reasonably designed to improve the policies
and procedures of AGA for ensuring compliance


 


4

















 


with the FCPA and
other applicable anti-corruption laws. The Monitor shall provide the report to
the Board of Directors of AGA and contemporaneously transmit copies to Mark F.
Mendelsohn (or his successor), Deputy Chief, Fraud Section, Criminal Division,
U.S. Department of Justice, 10th and Constitution Ave., N.W., Bond
Building, Fourth Floor, Washington, DC 20530. The Monitor may extend the time
period for issuance of the report with prior written approval of the
Department.


 


(iii) Within one-hundred twenty (120) calendar days after
receiving the Monitor’s report, AGA shall adopt the recommendations set forth
in the report; provided, however, that within sixty (60) calendar days after
receiving the report, AGA shall advise the Monitor and the Department in
writing of any recommendations that AGA considers unduly burdensome,
impractical, costly or otherwise inadvisable. With respect to any
recommendation that AGA considers unduly burdensome, impractical, costly or
otherwise inadvisable, AGA need not adopt that recommendation; instead, AGA may
propose in writing an alternative policy, procedure or system designed to
achieve the same objective or purpose. As to any recommendation on which AGA
and the Monitor ultimately do not agree, the views of AGA and the Monitor shall
promptly be brought to the attention of the Department. The Department may
consider the Monitor’s recommendation and the Company’s reasons for not
adopting the recommendation in determining whether AGA has fully complied with
its obligations under this Agreement.


 


(iv) The Monitor shall undertake two follow-up reviews to further
monitor and assess whether the policies and procedures of AGA are reasonably
designed to detect and prevent violations of the FCPA and other applicable
anti-corruption laws.


 


5

















 


(v) Within sixty (60) calendar days of initiating each follow-up
review, the Monitor shall: (A) complete the review; (B) certify
whether the anti-bribery compliance program of AGA, including its policies and
procedures, is appropriately designed and implemented to ensure compliance with
the FCPA and other applicable anti-corruption laws; and (C) report on the
Monitor’s findings in the same fashion as with respect to the initial review.


 


(vi) The first follow-up review and report shall be completed by
one year after the initial review. The second follow-up review and report shall
be completed by one year after the completion of the first follow-up review.


 


(vii) The Monitor may extend the time period for submission of the
follow-up reports with prior written approval of the Department.


 


7. In undertaking the assessments and reviews described above, the
Monitor shall formulate conclusions based on, among other things: (a) inspection
of relevant documents, including all the policies and procedures relating to
AGA’s anti-corruption compliance program; (b) onsite observation of AGA’s
systems and procedures, including its internal controls, record-keeping and
internal audit procedures; (c) meetings with, and interviews of, relevant
employees, officers, directors and other persons at mutually convenient times
and places; and (d) analyses, studies and testing of AGA’s anti-corruption
compliance program.


 


8. Should the Monitor, during the course of his or her engagement,
discover credible evidence that questionable or corrupt payments or
questionable or corrupt transfers of property or interests may have been
offered, promised, paid or authorized by any AGA entity or person, or any
entity or person working directly or indirectly for AGA, or that related false
books and records have been maintained, the Monitor shall promptly report such
conduct to


 


6

















 


AGA’s General
Counsel, its Board of Directors, and its outside counsel for further
investigation, unless the Monitor believes, in the exercise of his or her
discretion, that such disclosure should be made directly to the Department. If
the Monitor refers the matter only to AGA’s General Counsel, its Board of
Directors, and its outside counsel, AGA shall promptly report the same to the
Department and contemporaneously notify the Monitor that such report has been
made. If AGA fails to make disclosure to the Department within ten (10) calendar
days of the Monitor’s report of such conduct to AGA, the Monitor shall
independently disclose his or her findings to the Department at the address
listed in Paragraph 6(e)(ii) above. Further, in the event that AGA, or any
entity or person working directly or indirectly for AGA, refuses to provide
information necessary for the performance of the Monitor’s responsibilities,
the Monitor shall promptly disclose that fact to the Department. AGA shall not
take any action to retaliate against the Monitor for any such disclosures or
for any other reason. The Monitor may report other criminal or regulatory
violations discovered in the course of performing his or her duties, in the
same manner as described above.


 


7